United States trade conflict with China - Term Paper Example

? UNITED S TRADE CONFLICT WITH CHINA UNITED S TRADE CONFLICT WITH CHINA Introduction The international relation between the People’s Republic of China and the United States of America is often referred to as Sino-American relations. Since the beginning of the cold war to date, the relation between the two countries has been pretty cyclical. In fact, many analysts find the relationship not only complex, but also multi-faceted. The two countries cannot be considered enemies by any standards, but yoking them as allies could also be questioned. For a long time, the two countries have had a stable relationship. However, this relationship is threatened by competition and trade policies that have continued to stir controversy. The United States and China have the largest economies in the world. Therefore, any tension between them spills over to other countries and regions consequently affecting the entire world. China has the world’s largest population, while the United States has the world’s largest economy. This makes the two countries to be the largest trading partners in the world. Moreover, the bilateral relationship qualifies to be the most essential one in the 21st century. The two countries are the world’s economic giants and their united efforts towards attaining world peace and economic stability can yield unimaginable results. Amidst the trade tensions, the United States and China have a common stand in many fronts. The two countries have continued to support antiterrorism campaigns and nuclei proliferation. The significance of unity in fighting terrorism and nuclei proliferation to word peace is substantial. As such, closer relation between the United States and China is critical. This paper attempts to analyze the causes of trade tensions between the United States and China and their possible consequences. It also attempts to establish the viability of the United States venturing into other trade partnerships besides China. Literature Review The Sino-American trade relation has drawn conflicting reactions from many economics, researchers, and activists. While the existence of trade conflict between the two countries is widely accepted, differences arise in many other aspects. For instance, while other economists think the United States benefit more from its trade with China and imposing taxes on Chinese products is unjustified, others think the trade has destroyed the United States and its high time the United States took a bold step towards saving its local businesses and citizens from Chinese firms. According to Feigenbaum, the Sino-American trade wars will not end soon. However, the wars will be broadly manageable (Feigenbaum). Schuman, The Time business reporter, takes a rather interesting approach to the issue. He holds that resolving the war between the United States’ government and China will not be an easy one (Schuman). He cites the reluctance of both governments to drop their demands as the major hindrance to striking a consensus. Both governments, for instance, insist on fulfilling public demands, which have been a hindrance to a smooth trade. While the United States insist on preserving local jobs, the Chinese government is interested in finding market for locally produced products and an avenue for investment. A research by the Queensland University Staff on the probable effects of the United States’ regulation of Chinese imports favored the introduction of strict measures to control Chinese imports (126). The research concluded that setting such measures was inevitable and would be to the advantage of the United States government (126). It further stated that the United States “pressure should continue” (Queensland University Staff, 126). A sour trade relation between the United States and China is evidently destructive. All the countries stand to lose. The world’s economy is already threatened by this unhealthy competition and rivalry, and it could even get worse. If not resolved, the rivalry will result in unimagined effects on the two countries. Though China may not be affected in the short run, it stands to lose in the end. The United States government has already lost too much that any further lose will be like a drop in the ocean. The causes of disagreements and tension Yuan’s value manipulation According to the U.S. authorities, the Chinese government has deliberately embarked on lowering the value of the Yuan by over 40% to favor their trade with other countries, U.S. being worst hit (Congress 8747). Lowering the value of a country’s currency makes its products cheaper in the international market. Such goods are favored by the low-end market, which locks out other products from such markets. Because of lowering of the value of the Yuan, the Chinese products have become cheaper in the United States markets; while on the other hand, the United States’ products have become expensive in the Chinese markets. “Very country has sovereignty over their own currency, but countries do not have the right to manipulate their currency in away to create an unfair advantage in the world market place and still consider themselves a member of the family of nations” (Congress 8747). According to the United States congress, China’s failure to abide by set international standard regarding currency values hinders the possibility of fair completion. As such, imposing heavy tariffs on Chinese products is the only way of leveling market competition, a move widely criticized by Beijing. Methodology Data for the research will be collected from books, articles, and websites, which have trade statistics between China and the United States. Description will dominate the design, whereby the use of dispersions and measures of central tendency like the mean, standard deviations, variance, and mode will be used. The collected data will be refined through editing before any analysis is on the data is done. The analyzed data will be presented in the form of graphs and tables appropriate to this research. Appropriate use of quantitative and qualitative analysis tools will be used. The research variables will include types of goods for trade and quantity traded. Plan for data collection Data collection may be done using various methods. Data is classified as primary or secondary. This difference arises from their collection methods. While primary is data collected from the field for the first time, secondary data is data gathered from existing works by other researchers or writers. Dealing with secondary data may seem easy, but caution must be taken to avoid overreliance on the work and use of inaccurate data. Using a secondary source without thorough scrutiny may result in duplication, which is unprofessional. Since secondary data forms the basis on which new research is done, it is prudent to start with it. Secondary data Secondary data provides data from preexisting sources. The information could be recorded in written materials like periodicals, journals, and textbooks. Therefore, secondary data will be important in tracing the relevant information. The sources that will be used include videos, journals, internet, and the relevant books. Some of the advantages of using the secondary data intended are for cost effectiveness. This includes time and money consumption. For the purposes of this research, secondary data will be used. Preexisting data on the bilateral trade between the United States and China will be gathered and analyzed before drawing any conclusions. The data analysis will involve establishing trading variables such as averages and deviations. Trade Data Table 1: China's Trade with the United States, 2001-11 ($ billions)   2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 US exports 19.2 22.1 28.4 34.7 41.8 55.2 65.2 71.5 69.6 91.9 103.9   % change* 18.3 14.7 28.9 22.2 20.5 32.0 18.1 9.5 -2.6 32.1 13.1 US imports 102.3 125.2 152.4 196.7 243.5 287.8 321.5 337.8 296.4 364.9 399.3   % change* 2.2 22.4 21.7 29.1 23.8 18.2 11.7 5.1 -12.3 23.1 9.4 US balance -83.0 -103.1 -124.0 -162.0 -201.6 -232.5 -256.3 -266.3 -226.8 -273.1 -295.5 Source: US Department of Commerce Table 2: Top Ten US Exports to China, 2011 ($ billions) HTS # Commodity Description Volume % Change Over 2010 84 Power generation equipment 10.8 9.70% 12 Oil seeds and oleaginous fruits 10.7 -3.10% 85 Electrical machinery and equipment 7.2 -16.60% 87 Vehicles, excluding rail 6.4 55.60% 88 Aircraft and spacecraft 6.3 10.80% 90 Optics and medical equipment 5.2 8.30% 39 Plastics and articles thereof 5 7.20% 47 Pulp and paperboard 3.8 27.10% 74 Copper and articles thereof 3.7 32.70% 29 Organic chemicals 3.5 17.80% Source: US International Trade Commission Table 3: Top US Imports from China, 2011 ($ billions) HTS# Commodity description Volume % change over 2010 85 Electrical machinery and equipment 98.7 8.7 84 Power generation equipment 94.9 14.7 95 Toys, games, and sports equipment 22.6 -9.4 94 Furniture 20.5 2.7 64 Footwear and parts thereof 16.7 5.1 61 Apparel, knitted or crocheted 15.1 7.4 62 Apparel, not knitted or crocheted 15.0 1.8 39 Plastics and articles thereof 10.9 13.0 73 Iron, steel 8.6 18.0 87 Vehicles, excluding rail 8.1 17.0 Source: People’s Republic of China National Bureau of Statistics Table 4: China's Trade with the World, 2001-10 ($ billions)   2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Exports 266.1 325.6 438.2 593.3 762.0 968.9 1,217.8 1,430.7 1,201.6 1,577.9   % change* 6.8 22.4 34.6 35.4 28.4 27.2 25.7 17.5 -16.0 31.3 Imports 243.6 295.2 412.8 561.2 660.0 791.5 956.0 1,132.6 1,005.9 1,394.8   % change* 8.2 21.2 39.8 35.9 17.6 19.9 20.8 18.5 -11.2 38.7 Total 509.7 620.8 851.0 1,154.6 1,421.9 1,760.4 2,173.7 2,563.3 2,207.5 2,972.8   % change* 7.5 21.8 37.1 35.7 23.2 23.8 23.5 17.9 -13.9 34.7 Balance 22.6 30.4 25.5 32.1 102.0 177.5 261.8 298.1 195.7 183.1 Source: People’s Republic of China National Bureau of Statistics Table 5: China's Top Exports, 2010 ($ billions) HS# Commodity description Volume % change over 2009 85 Electrical machinery and equipment 388.8 29.1 84 Power generation equipment 309.8 31.4 61, 62 Apparel 121.1* 20.5* 72, 73 Iron and steel 68.1* 44.1* 90 Optics and medical equipment 52.1 34.0 94 Furniture 50.6 30.0 28, 29 Inorganic and organic chemicals 43.2* 34.9* 89 Ships and boats 40.3 42.1 87 Vehicles, excluding rail 38.4 37.5 64 Footwear 35.6 27.1 Source: People’s Republic of China National Bureau of Statistics Table 6: China's Top Imports, 2010 ($ billions) HS# Commodity description Volume % change over 2009 85 Electrical machinery and equipment 314.4 29.0 27 Mineral fuel and oil 188.7 52.1 84 Power generation equipment 172.3 39.4 26 Ores, slag and ash 108.6 54.9 90 Optics and medical equipment 89.8 34.1 39 Plastics and articles thereof 63.7 31.3 28, 29 Inorganic and organic chemicals 58.2* 37.2* 87 Vehicles, excluding rail 49.5 74.5 74 Copper and articles thereof 46.1 55.8 72, 73 Iron and steel 34.5* -6.1* Source: People’s Republic of China National Bureau of Statistics Table 7: China's Top Trade Partners, 2010 ($ billions) Rank Country/region Volume % change over 2009 1 United States 385.3 29.2 2 Japan 297.8 30.2 3 Hong Kong 230.6 31.8 4 South Korea 207.2 32.6 5 Taiwan 145.4 36.9 6 Germany 142.4 34.8 7 Australia 88.1 46.5 8 Malaysia 74.2 42.8 9 Brazil 62.5 47.5 10 India 61.8 42.4 Source: People’s Republic of China National Bureau of Statistics Table 8: China's Top Export Destinations, 2010 ($ billions) Rank Country/region Volume % change over 2009 1 United States 283.3 28.3 2 Hong Kong 218.3 31.3 3 Japan 121.1 23.7 4 South Korea 68.8 28.1 5 Germany 68.0 36.3 6 The Netherlands 49.7 35.5 7 India 40.9 38.0 8 United Kingdom 38.8 24.0 9 Singapore 32.3 7.6 10 Italy 31.1 53.8 Source: People’s Republic of China National Bureau of Statistics Table 9: China's Top Import Suppliers, 2010 ($ billions) Rank Country/region Volume % change over 2009 1 Japan 176.7 35.0 2 South Korea 138.4 35.0 3 Taiwan 115.7 35.0 4 United States 102.0 31.7 5 Germany 74.3 33.4 6 Australia 60.9 54.1 7 Malaysia 50.4 55.9 8 Brazil 38.1 34.7 9 Thailand 33.2 33.3 10 Saudi Arabia 32.8 39.2 Source: People’s Republic of China National Bureau of Statistics Analysis Trade volume The past two decades has seen a tremendous increase in trade volumes between the United States and China. In 2001, for instance, the United States and China traded $121.5 billion worth of goods (Table 1). Ten years later, the trade volume had peaked $503.2 billion (Table 1). The trade volume between the two countries has evidently grown in the period. However, there is a significant disparity in the volume and value of traded goods between the countries. The last decade alone has witnessed an increase of $84.7 billion of U.S exports to China, Chinese imports have grown by $297 billion, resulting in unfavorable trade between the two countries. From table 4, Chinese export to the world in 2001 was valued at $266.1billion. A significant $19.2 billion was exported to the United States. This represented 7.2% of its total exports. In ten years though, the trade has changed enormously. Chinese overall export increased to $1,577.9 billion in 2011(Table 4). Its exports to the United States also increased to $399.3 (Table 1). This represents a 25.31% of Chinese total exports. From the given data, it cannot be denied that the United States is the prime destination for Chinese products. Trade imbalance between the two countries Gradually, but steadily, the United States’ trade deficit with China has been on the increase. In 2001 for instance, the United States deficit was $80 billion. In 2011, however, the deficit had increased to an alarming $295.5 billion (Table 1). This is a worrying trend to the United States government. Table 2 presents another aspect of the trade imbalance. Two products among the top ten US exports to China are on a downward trend. Oil seeds and oleaginous fruits had decreased by 3.10% and Electrical machinery and equipment by 16.6% in 2011. These products are slowly being pushed out of the Chinese market by other countries like Taiwan and Japan, close Chinese trading partners in the past few years. Table 7 reveals yet another aspect of the trade imbalance between the Chinese and the United States’ government. Even though the United States tops the list of Chinese trading partners, other Asian and European countries have continued to increase their trade with China, putting the already slim United States’ share under threat. The percentage change in trading value over 2009 for brazil stood at 47.5%, Australia 46.5%, Malaysia 42.8%, India 42.4%, Taiwan 36.9%, Germany 34.8%, South Korea 32.6, Hong Kong 31.8%, Japan 30.2%, and United States 29.2%. From the findings, we can deduce that the United States is slowly, but surely being replaced as the principal exporter to China. Chinese trading trend with its leading trade partners, 2010 Country/Region Exports to China $billion Imports from China $billion Deficit/Surplus $billions Japan 176.7 121.1 55.6 South Korea 138.4 68.8 69.6 United States 102.0 283.3 -181.3 Germany 74.3 68.0 6.3 The three other main Chinese trading partners, Germany, Japan, and South Korea, all have a trading surplus with the country. The United States on the other hand, continues to record alarming deficits in its trade with China. This trend is also harmful to China. According to Huang, Chinese economy is 80% reliant on trade for its growth (Huang 14). Therefore, it the United States takes the bold step to restrict Chinese imports, the country will mourn. This is worsened by the fact that China has not concentrated in developing its local market base. With the largest population in the world, China has a large market, which when harnessed can provide even a much bigger market free of any manipulations and restrictions. Conclusion The U.S. Chinese trade is in great favor of China. The continued trade war between the countries is unhealthy not only for the two nations, but also to the world economy. China cannot be ignored as an economic powerhouse. It is, therefore, important for the United States to strive to associate with it. However, the current trade trend is unhealthy and should not be encouraged. Stringent policies, import taxes, should be encouraged when dealing with China. Works Cited Congress. Congressional Record Proceedings and Debates of the 108th Congress Second Session. Washington, DC: Government Printing Office, 2004.Print. Feigenbaum, Evan A.. "Asia Unbound." U.S.-China Trade Conflict is Here to Stay. But a€¦. Council on Foreign Relations, 20 Oct. 2010. Web. 28 Apr. 2012. . Huang, Jing. "The Economic Challenges and Oppotunities." Beijing Review 19 July 2010: 1-19. Print. "National Bureau of Statistics of China." Statistical data. National Bureau of Statistics of China, n.d. Web. 29 Apr. 2012. . Queensland University Staff. International trade and business law annual. Sydney: Cavendish Publishing (Australia), 1997. Print. Schuman, Michae. "Why the China-U.S. Trade Dispute Is Heating Up - TIME." Breaking News, Analysis, Politics, Blogs, News Photos, Video, Tech Reviews - TIME.com. N.p., 14 Sept. 2009. Web. 28 Apr. 2012. . "US Department of Commerce." U.S. Bureau of Economic Analysis (BEA). N.p., n.d. Web. 29 Apr. 2012. . Read More